Lease extension costs

Puddings

Hi all, 
Just want to run this past anyone who has experience of this. I am looking to extend the lease on my flat, we're at 82 years-ish, and have received the cost from the housing association, the freeholder. As shared ownership we can't go down the formal route but the HA say they stick close to this. Does the below make sense? 

I understand the property is valued at what it would be WITH the extended lease but I dont understand why here it say 'FREEHOLD VACANT POSSESSION VALUE' when it's not freehold. I think the value is probably about right though (1 bed flat in Hampshire).  

Also anyone have an idea of legal fees? I will have to pay both my own and the HA's, I haven't looked into this much yet to be honest.

Thanks in advance for any and all comments. 

princeofpounds

Looks reasonable. I plugged the data into the calculator below from Lease Advice and it's coming back with between 6-8k for a statutory valuation. And it's not like you can even access the statutory process as you point out. It's good that they are enabling you to do this - many freehold landlords don't and it's becoming an increasing problem we see on this board.

https://www.lease-advice.org/calculator/

Legal fees - Not sure but wouldn't be surprised if it's something like 2-3k for both sides. You aren't going to Tribunal so it's really just a paperwork job.

camden_kid

I paid a little over that to extend my lease.

Puddings

Thanks to both of you, that really helps! 

NameUnavailable

The price sounds very fair but I'm not familiar with the calculations and some terms. The main thing is to check what the ground rent will be after extension - it is reduced to zero when you go down the statutory route, I know you can't do that, but check that there isn't anything onerous that will make it difficult to sell at a future date.

Puddings

NameUnavailable said:

The price sounds very fair but I'm not familiar with the calculations and some terms. The main thing is to check what the ground rent will be after extension - it is reduced to zero when you go down the statutory route, I know you can't do that, but check that there isn't anything onerous that will make it difficult to sell at a future date.

Thank you, that's really useful, I'll definitely ask/check that. They're a housing association and not supposed to 'profit'... 

I will be double checking everything, they've had to wipe a very large bill today from all leaseholders accounts for roof repairs after realising they can't pass on costs more than 18 months after the cost was originally incurred so I don't particularly trust them! 

eddddy

The calculation suggests that the ground rent will be going down to zero.

Essentially, the calculation says you owe 83 years of ground rent at £250 per year - and you're going to pay it all in advance - but discounted at a rate of 6.5% per year. That equals £3,826  - and you can see that number in the calculation. 




But what percentage of the flat do you own? Is £170k the value of just your share? Or is it 100% of the flat's value?

(Different HA's have different policies. Some expect you to pay 100% of the lease extension cost, others expect you to pay a percentage of it. But it should be reflected in the future cost of staircasing.)

Puddings

Thanks eddddy, that's really useful to understand the calculation.
I own 60% and £170k is full value - HA expects us to pay 100% of costs. The mention of staircasing is interesting, I'm not sure whether I'll do that in the future or not to be honest but good to know! 

eddddy

Puddings said:

Thanks eddddy, that's really useful to understand the calculation.
I own 60% and £170k is full value - HA expects us to pay 100% of costs. The mention of staircasing is interesting, I'm not sure whether I'll do that in the future or not to be honest but good to know! 

OK - but the cost of staircasing might be relevant to a future buyer.

Essentially, because you are paying 100% of the lease extension cost...

If the HA are going to treat you (or a future buyer) fairly, when they do a valuation for staircasing, they should value the flat as though it has an 83 year lease instead of a 173 year lease (because you've paid for the lease extension and the HA haven't).

So that should make staircasing cheaper - for the future buyer.

amylan

Just commenting on the "Freehold Vacant Possession" terminology. This is correct.  All enfranchisement valuation calculations start with a FHVP value. In the case of a leasehold flat, the FHVP is a theoretical number that is broadly similar to the value of a long leasehold interest, and as shown in your calculation, your long lease valuation is 99% of the FHVP value, which is common.

Given you are going down a non statutory route, as well as ensuring you obtain an additional 90 years, with zero ground rent, ensure you are are issued with a new single lease and I would urge you to side by side the old and new lease yourself to understand which clauses have been amended. It is usual for defective and out of dates clauses to be amended or removed, however I would be on the alert for any other changes.

Puddings

Thanks eddddy and amylan, really really useful to know! Much appreciated.